Quiet is descending on the Wattenberg Field in Weld County — at least compared to the past five years of rapid drilling, constant fracking and heavy truck traffic.

“Basically, there aren’t many areas that at $30 a barrel provide rates of return that are adequate to put capital in the ground,” said David Zusman, chief investment officer at Talara Capital Management, a New York private equity firm that invests in energy assets.

That includes the Wattenberg, the crown jewel of the surrounding Denver-Julesburg Basin, which has come to account for about 90 percent of oil and gas activity in Colorado.

Last year, the D-J Basin seemed to be holding out better than competing prospects. It suffered only a one-third cut in investment and outgunned other areas in winning shares of shrinking capital budgets among the producers that knew it best.

But nine of the largest producers active in the D-J plan to invest only half of what they did this year compared with 2015, according to a Denver Post analysis of the guidance those companies provided to investors.

Anadarko Petroleum and Noble Energy, who account for about 60 percent of the production in the basin, are planning to average only three rigs this year versus the 24 they ran back in 2014.

In dollars, the nine producers together plan to invest about $2 billion in the D-J Basin this year, down from $4.3 billion last year and $6.4 billion in 2014.

“In southern Weld County, producers are drilling wells and capping them. Smaller companies are cutting back and battening down the hatches,” said Rich Werner, president and CEO of the economic development group Upstate Colorado in Greeley.

Falling capital spending

Shrinking investment budgets mean fewer workers will be needed, but so far the county’s economy hasn’t found itself cast in turmoil.

Hotels that catered to field workers are taking a hit, but not hotels serving the general public. Firms that rented equipment to oil companies are down, but restaurants are still busy. Field service firms are laying off, but wind turbine maker Vestas can’t find enough workers, and neither can general contractors, Werner said.

“We are keeping an eye on things more for the second half of a year,” Werner said. “That is where we want to hope that oil and gas prices will be stabilized.”

A number of things can explain why capital spending is falling so sharply, but it really comes down to low oil and natural gas prices.

When oil is in the low- to mid- $30 a barrel range, about 18 percent of the wells drilled in the D-J Basin last year are profitable, said Erika Coombs, a senior energy analyst at BTU Analytics in Denver.

If prices recover above $40 a barrel, then about 40 percent of those wells would be in the black. Adding capacity now risks selling production at a loss or accepting a razor-thin margin on reserves that will be more valuable in the future.

And right now, most lenders and investors don’t want to extend money to what they view as a losing proposition.

“Access to capital is much more limited,” Coombs said. “Companies have to stay within cash flow.”

Only 17 rigs were actively looking for oil and gas in Colorado at the end of the first week of March, according to counts from Baker Hughes, which has tracked drilling-rig activity since 1944.

That is down from 24 at the end of 2015, 69 at the end of 2014 and the peak of 77 rigs working in late September 2014.

Anadarko Petroleum, the state’s largest producer, plans to average one rig in 2016, down from seven last year and 14 humming back in 2014.

Anadarko has budgeted $500 million for the D-J Basin, which represents a sizable share of its onshore U.S. spending budget.

That said, Andarko’s entire onshore budget of $1.1 billion in 2016 is less than half of the $2.3 billion the company directed just at the D-J Basin back in 2014.

A consolidated land position, heavy infrastructure investments and the company’s ownership of mineral rights are keeping the Wattenberg as one of the top two onshore U.S. assets the company has,
Anadarko spokeswoman Robin Olsen said.

Preserving assets

Last year, Anadarko and other producers talked about focusing on the lowest cost and most productive opportunities. Increasingly, they now talk about preserving their best assets for the price rebound.

“Because of its importance to our company, we’re being very prudent and not drilling up the best opportunities in our portfolio in the current price environment,” Olsen said. “This will ensure we are well-positioned to accelerate when the time is right.”

But that new approach means Anadarko, which had held out against layoffs, is under pressure to bring its workforce of 1,500 in the state into line with its much smaller investment budget.

Noble Energy, the state’s second-largest producer, will funnel $600 million into the D-J Basin, a big portion of the $1.5 billion in total capital investments it plans to make this year.

Like Anadarko, the D-J positions remain among Noble’s favorite, but there is simply less money to go around.

Denver-based Whiting Petroleum is winding down its exploration efforts in North Dakota’s Bakken formation and focusing a shrinking budget on the D-J Basin. It is planning to invest $163 million and two rigs this year there, down from $575 million and four rigs in 2014.

Two other Denver-based producers, Bill Barrett and Bonanza Creek, plan to let go of the one remaining rig they each have at the end of the first quarter. Bonanza Creek, in particular, is winding down capital spending.

Encana Oil & Gas USA, the basin’s third-largest producer, remains in a state of limbo, waiting for a $900 million sale of its D-J assets to The Broe Group, a Denver-based conglomerate, and the Canada Pension Plan Investment Board later this year.

“With the sale of the asset pending, we haven’t allocated any capital to the D-J for 2016. And so, there are no rigs running,” said spokesman Doug Hock.

On Thursday, Hock said Encana expects to cut its workforce by 20 percent companywide. How the cuts shake out in Colorado, where Encana employs 1,042 people, will be announced late this week, he said.

Production efficiency

One company, however, is bucking the trend. Denver-based PDC Energy will deploy four rigs, down from five last year, but enough to make it the dominant driller in the D-J Basin.

So how is PDC Energy able to keep going as much larger competitors with deeper financial resources pull back?

The company has comparatively low debt, low operating costs and contracts that allow it to sell its production at prices far above the going market rate.

As a result, stock investors have continued to support the company. When PDC offered 4 million shares last week, it ended up selling closer to 5.9 million, raising $301 million.

And the sale didn’t drive down the value of PDC Energy shares, which remained in the low $50 range, despite the comparatively large size of the offering.

Some D-J firms are planning to drill wells but not frack them until prices recover, while others have stopped drilling and are looking to spend their limited capital on fracking wells they drilled earlier.

But PDC Energy will drill and complete as many wells as it can. Rivals may be taking measured steps, but PDC Energy continues to go full-bore.

“We’re really not in a mode of building completion inventory, and it’s also an efficiency issue for operating teams. They are really set up with the four rigs to obviously drill the pad out, build the schedule. We’re (working) very closely with our completion provider,” PDC president and CEO Bart Brookman told analysts in a conference call last month.

That said, other producers, in their guidance statements, are leaving themselves room to ramp up capital spending quickly should prices suddenly rebound.

“As has been our historical practice, we regularly review capital expenditures throughout the year and will adjust our investments based on changes in commodity prices, service costs and drilling success,” Denver-based Synergy Resources advised its shareholders.

If oil price forecasts from the U.S. Energy Information Administration pan out, things are likely to get even quieter before they get busier in northeastern Colorado.

The EIA forecasts that West Texas Intermediate crude will average $34 a barrel in 2016 and $40 a barrel in 2017 — too low to revive capital investment in Colorado’s biggest oil field.

And that creates another problem. The longer producers take to wind down, the harder time survivors will have gearing back up when demand requires it, Coombs said.

Sleep too long and you may never wake up. That happened to the home construction industry following the housing bust last decade, and it created a lack of capacity that Denver home buyers are paying dearly for years later.

I have worked at The Post since late 2000. My beats include residential real estate, economic development and the Colorado economy. Other publications where I have worked include Financial Times Energy, The Denver Business Journal and Arab News. My parents immigrated from northern Italy, although my great grandparents came to Central City in the late 1800s.